AUGUST 27, 2014

By S J Singh, Advocate

PROVISOS have been inserted in Section 129(D), Sub-Section (3) of the Customs Act, 1962 and in Section 35E, Sub-Section (3) of the Central Excise Act, 1944 by The Finance Act, 2014. Both the provisos are identically worded. They read as under:

"Provided that the Board may, on sufficient cause being shown, extend the said period by another thirty days."

Under Section 129D of the Customs Act and Section 35E of the Central Excise Act, a Committee of Chief Commissioners has the power to examine the legality or propriety of an adjudication order passed by a Commissioner.If the Committee is satisfied that the adjudication order is not legal or proper then it orders that an appeal be filed before the Appellate Tribunal. Similarly, Commissioner has power to examine the legality and propriety of the adjudication order passed by officer subordinate to the Commissioner and order for filing of appeal before Commissioner (Appeals), if the Commissioner is not satisfied with the legality or propriety of such adjudication order. The order passed by the Committee of Chief Commissioners or Commissioner may, for ease of understanding, be called "Review Directions" (R.D.). Sub-Sections (3) of both the Sections mentioned abovelay down that R.D.be passed within a period of three months from the date of communication of decision or order of the adjudicating authority. By insertion of provisos to the aforesaid Sub-Sections, power has been bestowed on the Board to extend that period of limitation for passing R. D. by thirty days, if sufficient cause is shown for such extension. Under Sub-Sections (4) of Sections 129D & 35E, the appeal is to be filed by the authorised officer before the Appellate Tribunal or Commissioner (Appeals) within one month from the date of communication of R. D.

First, the language of the "Provisos" is not in consonance with both the Sections in which they have been inserted. While in the Sections, the phrase for period of limitation, where ever it occurs, is used in terms of "months" or "month"while the phrase used for period of extension in the proviso is "thirty days". The period of limitation for passing R. D. is "three months" but the period of extension is not more than "thirty days". In addition to incongruous reading of the statutes it can lead to avoidable litigation. A period of three months may not always be a period of ninety days. It could be two or three days more or less than ninety days. The question can be raised as to whether a period of three months may be computed as per the days of the Gregorian calendar months of the year or as a period of ninety days as the proviso mentions the period of extension of limitation period by the number of days and not by number of months. The argument of intention of the legislature could be extended on both sides. It can be argued that since the proviso was added subsequently hence it conveys better and the latest intention of the legislature. A period of even one day can be important to determine the period of limitation and it can be question of millions of rupees. This was an avoidable error in drafting and should have been avoided.

Secondly, is the power bestowed on the Board an administrative power or a quasi-judicial power? Can the Board extend the period of limitation on a proposal sent by a field formation giving justification for the delay in passing R. D. without hearing the party whose interest would be adversely affected by extension period of limitation? Or, the Board shall have to give an opportunity to the other party to put his point of view on the "sufficiency" of the cause for extending the period of limitation?

When a statute provides for period of limitation for any action to be taken, then on the expiry of such period of limitation there is legal bar on taking of the said action. One of the salutary principles of resolution of disputes and administration of justice is that after lapse of reasonable period of time even the statutory appellate remedies should not be available. This principle is based in equity and justice. The endeavour is that incompatibility in opinions should be resolved and certitude should be brought within reasonable period of time. The appellate remedy by the aggrieved party has to be availed within the time limit fixed for it by the legislature. However, to prevent the miscarriage of justice, the appellate authorities, on sufficiency of cause being shown, often have the power to condone the delay in availing the appellate remedy. The power to condone the delay is judicial power. The honourable Supreme Court of India has laid down norms to be observed while exercising the power to prevent capricious or biased exercise of this power.

Bestowing the power of extending the period of limitation on CBEC, which is neither an adjudicating authority nor an appellate authority under the customs and Central Excise laws, is a very unusual instance. It may lead to hasty conclusion that it is an administrative power and in exercise of this power there shall be no necessity to follow even the principles that quasi-judicial authorities are required to follow.

The honourable Supreme Court has held in the case of Maneka Gandhi Vs Union of India, AIR 1978 SC 597, that even the administrative authorities are required to follow principles of natural justice before taking any prejudicial action. Extending the period of limitation is an action prejudicial to the interest of the person who holds a favourable decision from the original adjudicating authority.

The Customs Act, in proviso to Section 110 (2) has provision similar to afore said two provisos. Section 110 deals with seizure of goods, documents and things. Sub-Section (2) of Section 110 lays down that when in respect of seized goods no notice is given under clause (a) of Section 124 within six months from the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.

Under the proviso to Sub-Section (2), the Commissioner of Customs has the power to extend the period for issuance of show cause for a further period of six months. The proviso reads as under:

"Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months."

Accordingly, in the newly inserted provisos to Section 129D (3) and 35E (3) and in proviso to Section 110 (2), the period of limitation can be extended on "sufficient cause being shown" to the competent authority."Sufficiency of the cause" is essential feature for extension of limitation period.

Extracts from paragraphs 12 to 15 of the decision of the Honourable Supreme Court of India, in the case of Assistant Collector of Customs and Superintendent, Preventive Service Customs, Calcutta and others Versus Charan Das Malhotra, 1983(13)ELT 1477, explain the ambit of the words, "sufficient cause being shown". (The term "Collector" be understood as "Commissioner" in the judgement)

"12. There can be no doubt that the proviso to the second sub-section of Section 110 contemplates some sort of inquiry. The Collector, obviously, is expected not to pass extension orders mechanically or as a matter of routine but only on being satisfied that there exist facts which indicate that the investigation could not be completed for bona fide reasons within the time laid down in Section 110(2), and that therefore, extension of that period has become necessary. He cannot, therefore, extend the time unless he is satisfied on facts placed before him that there is a sufficient cause necessitating extension. The burden of proof in such an inquiry is clearly on the Customs Officer applying for extension and not on the person from whom the goods are seized."

"13. ………The words "sufficient cause being shown" must mean that the Collector must determine on materials placed before him that they warrant extension of time. Where an order is made in bona fide exercise of power and within the provisions of the Act which confers such power, the order undoubtedly is immune from interference by a Court of law, and therefore, the adequacy of the cause shown may not be a ground for such interference. But there can be no doubt at the same time that the inquiry to be held by the Collector has to be on facts, i.e., materials placed before him. There is, therefore, no question in such cases of the subjective satisfaction of the Collector, for, what he is asked to do by the proviso is to determine that the cause shown before him warrants an extension of time."

"14. ……….If the power of preparing a selection list without the power to appoint, as in Kraipak's case, (1969) 2 SCC 262 and power to transfer indentured labour from one to another employer, as in (1918) AC 557, are held, in the context of their respective provisions, to be quasi-judicial powers, there is no reason why, when the statute requires the determination of a sufficient cause on facts produced before the Collector should be held not to be a quasi-judicial function or at least a function requiring judicial approach."

"15. ………….Since the Collector has on facts to decide on the existence of a sufficient cause, although his decision as to sufficiency of materials before him may be within his exclusive jurisdiction, it is nonetheless difficult to comprehend how he can come to his determination unless, as the Division Bench of the High Court has said, he has before him the pros and cons of the question. An ex parte determination by the Collector would expose his decision to be one sided and perhaps one based on an incorrect statement of facts. How then can it be said that his determination that a sufficient cause exists is just and fair if he has before him a one sided picture without any means to check it unless there is an opportunity to the other side to correct or controvert it. The difference in the language used in the first sub-section and the proviso to sub-section (2) lends support to the contention that the power in one case may be subjective, and therefore, not calling for an enquiry, and the power in the other is one, the exercise of which necessitates an enquiry into the materials placed before the Collector for his determination. In our view, these considerations lead to the conclusion that the power under the proviso is not to be exercised without an opportunity of being heard given to the person from whom the goods are seized. (underlining supplied)

Accordingly, any authority which has to pass an order on "sufficient cause being shown" is a quasi-judicial authority or at least it should function judicially. It cannot pass an ex parte order.It has to give an opportunity of being heard to the person whose interests are to be adversely affected by the order of the authority.

Would it be possible for the Board to comply with the principles of natural justice of, service of notice giving tentative grounds for extension of period of limitation, giving reasonable time to the other party to make his representation, hear him and pass a speaking order for extending the period of limitation in less than thirty days? It appears that an exercise to extend the time limit would be a race against time. It can happen that on the date fixed for the hearing, the Member of the Board has to attend an inter-ministerial meeting, meeting with Revenue Secretary or Finance Minister which was outside his contemplation when he fixed the hearing. Thereafter, the other party may plead pre-occupation for some days and in the process the period of thirty days are lost.

No purpose would be served to pass the order for extension of time period after the period of "three months" and "thirty days" from the date of communication of the order for which R. D. are to be passed. The statute permits only "three months" of time to pass the R. D. Only "on showing sufficient cause" the period for passing the appropriate order can be extended by "another thirty days". No time, more than "three months" and "thirty days", is permitted for passing R. D.

Is it not that the power to extend the period of limitation by a period of "another thirty days" is too short a period when the power is to be exercised judicially? Or, was it believed that the Board would not be required to follow the principles of natural justice to exercise this power?

Let us now see, what could be "sufficient cause" to justify extension of the period of limitation? If the officials are under the belief that usual arguments of shortage of staff, absence of conversant officer, competent officer being on leave or not having been appointed, delay in obtaining the opinion of the appropriate authority, non-functioning of some office equipment, misplacing of records etc. are going to be justifiable ground for extension of period of limitation then the following observations of the honourable Supreme Court in the case of Office of the Chief Post Master General Versus Living Media India LTD. - 2012-TIOL-123-SC-LMT, are going to be rude shock for them:

"12………..In the absence of plausible and acceptable explanation, we are posing a question why the delay is to be condoned mechanically merely because the Government or a wing of the Government is a party before us. Though we are conscious of the fact that in a matter of condonation of delay when there was no gross negligence or deliberate inaction or lack of bona fide, a liberal concession has to be adopted to advance substantial justice, we are of the view that in the facts and circumstances, the Department cannot take advantage of various earlier decisions. The claim on account of impersonal machinery and inherited bureaucratic methodology of making several notes cannot be accepted in view of the modern technologies being used and available. The law of limitation undoubtedly binds everybody including the Government.

13. In our view, it is the right time to inform all the government bodies, their agencies and instrumentalities that unless they have reasonable and acceptable explanation for the delay and there was bona fide effort, there is no need to accept the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural red-tape in the process. The government departments are under a special obligation to ensure that they perform their duties with diligence and commitment. Condonation of delay is an exception and should not be used as an anticipated benefit for government departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few. Considering the fact that there was no proper explanation offered by the Department for the delay except mentioning of various dates, according to us, the Department has miserably failed to give any acceptable and cogent reasons sufficient to condone such a huge delay. Accordingly, the appeals are liable to be dismissed on the ground of delay. (underlining supplied)

(The author is a former Commissioner of Central Excise.)